Aust PMI: Cautious start to year already for manufacturers

07 February, 2008

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Global market turbulence contributed to a cautious start to the year for manufacturers with the leading market indicator for manufacturing activity, the Australian Industry Group - PricewaterhouseCoopers Australian Performance of Manufacturing Index (Australian PMI®), falling by 8.4 points in the month to 49.2.

The January fall follows 19 consecutive months of growth for the sector and also reflects concerns about interest rates and rising input costs, along with seasonal influences.

Ai Group Chief Executive, Heather Ridout, said: "The January Australian PMI® outcome is clearly disappointing, but needs to be seen in the context of a strong finish to 2007.

"How events unfold in global financial markets and the future course of interest rates will be important in shaping the prospects for the industry in the months ahead. Nevertheless, at this stage manufacturers remain reasonably positive with moderate growth predicted for the year in the face of intensely competitive market conditions," Ridout said.

"Under these tough operating conditions an ongoing focus on cost control and increased operational efficiency is paramount to sustaining growth in profitability," Billings said.

Australian PMI® Key Findings for January:

- The seasonally adjusted Australian Industry Group-PricewaterhouseCoopers Australian PMI® fell 8.4 points in January to 49.2. - The decline in activity was registered in declines in production, capacity utilisation, employment, new orders and deliveries. Stocks grew modestly. Exports remained stable. - Input cost price growth remained strong in January, while selling price growth continued to rise. Growth in wages eased for the second consecutive month. - Activity expanded in five sectors in January, with growth strongest in the transport equipment; construction materials; basic metal products; fabricated metal products; and textiles sectors. - Manufacturers cited as factors driving weaker activity in January: import competition; lack of skilled labour; shortages of raw materials; uncertainties due to concerns over global financial markets and growth; and weather conditions. Seasonal factors in regard to factory shutdowns over the holiday break also contributed to weaker production. - Activity fell in Victoria, NSW and Queensland in January, while growth eased in SA, WA and Tasmania.

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